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All you need to know about UK import tax and duty
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The bilateral trade between Malaysia and the United Kingdom has been growing steadily for the past 26 years, and it is currently valued at a whopping 5.6 billion euros. 

With both countries actively working to remove trade barriers, more treaties benefiting Malaysian businesses are expected, which make this the perfect time for Malaysian businesses to enter this market. 

This article will provide you with all the UK import duties and taxes that you need to know to help you get started. 

Type of Duties and Taxes

Customs duties and taxes in the United Kingdom are under the purview of Her Majesty's Revenue and Customs (HMRC). This authority primarily enforces 2 types of duties and taxes on goods imported into the UK:

  1. Customs Duties 
  2. Value Added Tax

Customs Duties

HMRC applies customs duties to imported goods valued above GBP 135. These duties typically range from 0% to 25% of the goods' value, with the exception of gifts.

Gifts valued between GBP 135 and GBP 630 incur a customs duty rate of 2.5% or less, while gifts exceeding the GBP 630 threshold are subject to higher rates, determined by their specific commodity codes.

Refer to the table below for clarity:

Type and Value of Goods

Applied Rates

Any goods under GBP 135

Not applicable

Gifts worth GBP 135 to GBP 630

2.5% (lower for some goods)

Gifts above GBP 630 and any other goods above GBP 135

Depends on the country of export and the type of goods. Refer to the commodity code to find exact rates here UK Integrated Online Tariff: Look up commodity codes, duty and VAT rates - GOV.UK (trade-tariff.service.gov.uk)

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Value Added Tax (VAT)

Imported goods in the country typically incur a standard 20% VAT rate. However, certain products like health items, fuel heating, and child car seats are taxed at a 5% VAT rate. 

While essential items like most food, books, and children's clothing are VAT-exempt, it's important to note that their sale must be reported on your VAT return. Additionally, gifts valued below GBP 39 are also exempt from VAT.

In summary, here’s the VAT charges:

VAT Rates

Applied Goods

Standard rate 20%

This applies to most services and goods

Reduced rate 5%

This applies to some goods and services such as health products, fuel heating and car seats for children

Zero rate 0%

This applies to most food, books and clothes for children

Besides, HMRC also levies 2 other types of duties and taxes based on some situations:

  1. Anti Dumping Duty

  2. Excise Tax

Anti Dumping Duty

Anti-dumping duty is charged on imported goods intentionally priced lower than similar products in the UK. 

This duty is enforced by the UK government to protect the local businesses from unfair overseas competition. The exact rate of anti-dumping duty varies based on the goods and the importing country but can reach up to 50% of the imported goods' value.

Excise Tax

Excise Tax is a duty that applies only to imported liquor and tobacco products, but the way charges are imposed varies for each category.

Alcohol Duty

Alcohol duty is determined based on the type of alcohol, strength of alcohol, or 'alcohol by volume' (ABV). Here's a list of alcohol duties for all types of products

Type of alcohol

Strength (ABV)

Rate per litre of pure alcohol

Beer

At least 3.5% but less than 8.5%

GBP 21.01

Beer, cider, wine, spirits or other fermented products

Less than 3.5%

GBP 9.27

Beer, cider, wine, spirits or other fermented products

At least 8.5% but less than 22%

GBP 28.50

Beer, cider, wine, spirits or other fermented products

More than 22%

GBP 31.64

Sparkling cider

At least 3.5% but less than 5.5%

GBP 9.67

Sparkling cider

At least 5.5% but less than 8.5%

GBP 24.77

Still cider

At least 3.5% but less than 8.5%

GBP 9.67

Wine, spirits and other fermented products

At least 3.5% but less than 8.5%

GBP 24.77

All kinds of tobacco and alcohol products, whether for commercial use, gifts, or personal effect, will be subject to excise tax. Shipments will be seized if they are:

  • Spirits more than 35 centiliters without a UK duty stamp

  • Cigarettes or hand-rolling tobacco without UK health warnings or fiscal marks

Tobacco Duty

Different rates apply to different kinds of tobacco. Here’s how each category of product is taxed

Tobacco Product

Rate

Cigarettes 

16.5% of the retail price with an additional GBP 5.89 on a packet of 20

Cigars

GBP 3.68 on a 10g cigar

Hand rolling tobacco

GBP 10.53 on a 30g packet

Other smoking tobacco and chewing tobacco (eg. pipe tobacco)

GBP 4.85 on a 30g packet

Tobacco for heating

GBP 1.82 on a typical packet

Calculating Duties and Taxes

Calculating Customs Duty

There are 2 ways to calculate customs duty: CIF or FOB.

To determine which to follow, you’ll need to refer to the term specified in your shipping agreement. 

Once that’s clear, identify your goods' commodity code on the UK tariff trade site, and check the applicable customs duty and VAT rates. Then, multiply the values of goods by the customs duty rate stated.

Here’s an example:

Goods2000 units of umbrella
Commercial Value/unitGBP 5
Commodity Code6601 1000 00
Custom Duty (stated on UK Tariff Trade Site)4%
VAT Rate20%
Assumed Insurance and Freight CostGBP 500

CIF (Cost, Insurance and Freight)

If you’re following the CIF calculation, note that CIF takes into account the value of goods, insurance and freight. 

To begin, add the total value of your shipments, which is GBP 10,000 in this case, to the insurance and freight cost, which is GBP 500. This gives you a total CIF value of GBP 10,500.

Next, multiply the total CIF value by the customs duty rate of 4% from the UK tariff trade site, resulting in customs duties of GBP 420 applicable to your shipment.

In total, your shipment will cost GBP 10,920.

Calculation formula:

CIF x Goods Duty Rate = Customs Duty

Calculation breakdown:

 1.   Calculate the Total Value of 2000 Umbrellas:

            GBP 5 x 2000 = GBP 10,000

 2.   Add the Total Value of 2000 Umbrellas with the insurance and freight cost to get the CIF Value:

            GBP 10,000 + GBP 500 (Insurance and Freight Cost) = GBP 10,500

  3.  Calculate the Total Import Duty Rate:

            GBP 10,500 x 4% = GBP 420

FOB (Freight On Board)

If FOB is the term applied to your shipment, note that it does not take into account the insurance and freight costs. 

Hence, to calculate, just multiply the total value of your goods, GBP 10,000 in this case, by the duty rate specified in the UK trade tariff, which is 4% for this item. This results in customs duties of GBP 400 for your shipment. 

Calculation formula:

FOB value x Goods Duty Rate = Customs Duty 

Calculation breakdown: 

    1. Calculate the Total Value of 2000 Umbrellas.

            GBP 5 x 2000 = GBP 10,000

    2. Calculate the Total Import Duty Rate.

            GBP 10,500 x 4% = GBP 400

Calculating Value-Added Tax (VAT)

To calculate VAT, multiply the value of your shipment, either CIF or FOB depending on your shipping agreement's terms, by the VAT rate specified on the UK tariff trade site.

Continuing from the previous example, umbrellas have a VAT rate of 20%. The calculation will be as follows:

CIFFOB
GBP 10,500 x 20% = GBP 2,100GBP 10,000 x 20% = GBP 2,080

Duties Threshold and Exemption

At this point, you’d have known that the UK has enforced a few types of duties on a shipment. Just like how they all have their own calculation method, each of them has their own exemption rules.

For customs duties, GBP 0 is the de minimis threshold set for all commercial shipments. This essentially means that all goods are subject to duties.

However, for personal shipments, the duty threshold is GBP 135. This means that duties are exempted for goods valued below this threshold, while duties will be charged on goods valued above it.

Gifts are an exception. All gifts valued between GBP 135 and GBP 630 are subject to a 2.8% duty.

As for VAT, exemption only applies on gifts below GBP 39 and most children’s items such as food, books and clothes. 

Other than these, free trade agreement is another determining factor when it comes to duties exemption. However, currently there’s no free trade agreement between Malaysia and United Kingdom.

Duties and Taxes Payment Method

Generally, as part of its procedure, UK customs will notify your chosen courier about the applicable fees and payment deadline, eliminating the necessity for you to perform the calculations on your own.

However, to expedite the clearance process, you can request a copy of the shipping invoice from your supplier before the delivery and inform your courier in advance about the charges, enabling them to clear the payment before the shipment arrives in the UK

Other than paying through a courier, there are several ways to pay import duties and taxes.

A duty deferment account

A duty deferment account allows you to make one single transaction in a month for multiple consignments and allows you to delay payment for customs duty, excise duty and VAT.

However, you'd need to register for a duty deferment account to use this transation method.

Additionally, Great Britain and Northern Ireland have different ways to apply for a duty deferment account.

A cash account

Youc an pay via a cash account if you have access to the Customs Declaration Service. Through a cash account, you will be able to:

  • Make payment into your cash account.

  • Authorise your agent to use the account on your behalf.

  • Pay import duties and taxes from the cash account, in the order of when you made the declarations.

  • Withdraw funds from your cash account.

General guarantee account

The 3rd option you have is to pay through a general guarantee account. A general guarantee account allows you to:

  • Provide multiple guarantees from the same account, rather than needing to provide separate guarantees.

  • Continue importing goods into the UK and pay the amount due later, once the amount is agreed upon.

You can use a general guarantee account to pay:

  • Customs duty

  • Import VAT

  • Excise duties

  • Amounts due under the UK Agricultural Policy

  • Anti-dumping or countervailing duties

  • Quotas

Immediate payments

Lastly, there's immediate payments, which can be made in 2 different ways - Customs Declaration Service or CHIEF.

To pay through the Customs Declaration Service, you'll require the Customs Declaration Service Immediate (CDSI) reference number, which you'll receive during your declaration process. This reference number typically starts with 'CDSI,' followed by a combination of 12 numbers and letters.

Be sure to provide an accurate CDSI reference number to avoid any delay in customs clearance.

As for CHIEF, it is an option available for a Direct Input Trader (DTI) agent only.

That's everything you need to know about UK import duties. 

Nevertheless, duties are just one aspect to consider. Equally important are the licenses required for your imports, such as obtaining a permit for excise goods, which is essential knowledge before sending your shipment.

Feeling overwhelm by it all? Reach out to us for support. At DHL Express, we assist business shippers across all industry to prepare their customs paperwork and help clear thousands of shipments everyday. We stay ahead of the curve on customs requirements and updates. 

Open a business account to experience a hassle-free UK shipping journey.

Yes. For commercial shipments, all shipments are subject to duties, while for personal effects, shipments valued at GBP 135 (approximately MYR 790) and above, customs duties are levied based on their value.

Additionally, all goods are subject to VAT, regardless of their value.

To calculate the UK import duty tax for your items, follow these steps:

  1. Multiply the duty rate by the total value of the commercial shipment, which includes the item's commercial value, shipping costs, insurance, and freight costs.
  2. Multiply this duty amount by the relevant VAT rate.

The formula to calculate the duty amount is:

Total Shipment Value (Commercial Value of Item + Shipping Cost + Insurance + Freight Cost) x Duty Rate x VAT Rate = Duty Amount

There are 4 ways to pay for duties and taxes in UK:

  1. Duty Deferment Account
  2. Cash Account
  3. General Guarantee Account
  4. Authorise third parties to handle your deferment, cash or guarantee account

To know what are the requirements for each method, refer to the guide above. 

UK customs charges 4 types of duties on import shipment:

Customs Duties

This duty applies to all commercial shipment and personal effect shipment that value at GBP 135 or more

VAT 

UK imposes 20% of VAT charges on all imported shipments and 5% on health products, fuel heating and car seats for children.

VAT is exempted for gift below GBP 39 and food, books and clothes for children.

Excise Duty

This only applies to alcohol and tobacco products.

Anti-dumping Duty

This tax is charged on imported goods that are intentionally priced lower than similar goods in the UK

The payment of duties and taxes is generally made by the receiver but duties can be paid by either party, sender or receiver. 

If you would like to pay the duty and tax on behalf of the receiver, you can easily manage this through DHL Express account.

20% is the standard VAT rate charged on all imported shipments. However, goods like health products, fuel heating and car seats for children can enjoy a reduced rate at 5%. And VAT is exempted for foods, books, and children clothes.